GDP figures show unexpected growth, as Reeves warns 'now is not the time to put economy at risk'

The UK economy unexpectedly grew during first month of the Iran war, new official figures reveal.

GDP, a key economic measure of everything produced in the economy, expanded 0.3% in March, according to the data from the Office for National Statistics (ONS).

Economists polled by Reuters news agency had predicted a contraction of 0.2%.

There was also growth in the first three months of the year, with expansion of 0.6%, ONS data also showed on Thursday morning.

It means the UK currently has the biggest GDP growth of all the G7 group of industrialised nations for the first quarter of 2026, though Japan has yet to release data.

Figures show we have right plan, says Reeves

The figures come with Sir Keir Starmer braced for a possible leadership challenge and could help the prime minister make the case that Britain is already on the right track as he battles to stay in No 10.

Chancellor Rachel Reeves was quick to suggest that they showed that now was not the time for the change and that the government had "the right economic plan".

"Now is not the time to put our economic stability at risk," she said. "To do so would leave families and business worse off.

"Instead, this government is getting on with the job of building an economy that is stronger, more resilient, and prepared for the future."

Why did the economy grow?

The growth came as production and construction held up well in the face of higher energy costs stoked by oil and gas supply disruption caused by the Iran war.

There had been fears that economic activity would be dampened by higher prices for people filling their cars or heating their homes with oil.

The March figures follow an increase in February, when GDP rose by 0.4%.

The latest growth is being attributed to a "broad-based" expansion in the services sector, the largest part of the UK economy, the ONS said.

Performing particularly well were computer programming and advertising, the ONS's director of economic statistics, Liz McKeown said.

The numbers are even better on a per-person basis, which removes the effect of population growth via immigration that can increase the headline GDP figure.

So-called GDP per capita is up 0.9% compared with the same time a year ago.

A note of caution

The strength of the figures, however, could have been impacted by companies' reaction to the Iran war-related supply disruption.

"GDP strength is exaggerated by front-running of potential supply disruptions and noise in some sectors," said economic research firm Pantheon Macroeconomics's chief UK economist, Rob Wood.

"So we need to be cautious about judging the genuine trend."

Economists still believe the war will slow growth.

Simon Pittaway, a senior economist at the Resolution Foundation thinktank said: "The war in Iran is set to slow growth, lower typical household incomes by £550 this year and increase government borrowing by £16bn by the end of the decade.

"All of which presents a challenging backdrop to any government reset."

(c) Sky News 2026: GDP figures show unexpected growth, as Reeves warns 'now is not the time to put economy at risk'